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The guidelines apply to all areas of the CRR where the concept of ‘group of connected client' is used, including the EBA technical standards and the EBA guidelines that refer to that concept.
The guidelines cover the two types of interconnection that lead to two or more clients being regarded as a single risk, i.e. control relationships and economic dependencies.
In particular, the Guidelines clarify that institutions should make use of their clients' consolidated financial statements when assessing the existence of control. In addition, they also provide a non-exhaustive list of indicators of control that institutions should use when assessing those clients to which EU accounting rules do not apply.
Regarding the assessment of interconnections based on economic dependencies, the final Guidelines confirm the requirement to consider two or more clients a single risk when funding or repayment difficulties of one client are likely to affect (an)other client(s).
Guidance is also provided on the assessment of situations where control and economic dependency are interlinked and can, therefore, lead to the existence of one group of connected clients as opposed to two separate groups of connected clients.
The Guidelines expect institutions to identify all control relationships and also to take reasonable steps to investigate and identify economic dependencies among their clients. However, given the inherent difficulty of identifying all economic dependencies, they require that institutions take a proportionate approach and strengthen the investigation of economic dependencies in all cases where the sum of all exposures to one individual client exceeds 5% of Tier 1 capital.